Diversity in trustee boards has been on the agenda for quite some time. The pension industry may not feel as though it is at the cutting edge of society, but it has recognised that diverse Trustee Boards make for more informed decision making and stronger governance.
All trustee boards need to be more diverse, but we need to ask what we mean by diversity and where sometimes it is background or approach that adds far more than the legislative focus on gender.
Makes a Diverse Board?
There are many aspects to equality and diversity but at a time when even finding new trustees for legacy pension schemes is a major challenge, is diversity the cherry on top of the icing when we really need to concentrate on the cake?
With an increasing trend towards Sole Trustee appointments, does this mean that as an industry we now don’t prioritise diverse opinions and skills and leave it to “the professionals”?
Whatever the composition of the Trustee Board, it is the diversity of skills, perspectives and life experiences that adds balance. Many trustees come from finance backgrounds, but financial skills aren’t a prerequisite of good trustee board governance and not every trustee needs to a specialist in compound interest and statistics. In the words of David Fairs at the AMNT conference in March 2019, “a good trustee needs more than the ability to tot up a spreadsheet.”
What is a Trustee and What Do You Need From a Trustee?
You need a trustee team that can understand the complexities
of areas such as investments but equally you need trustees that can challenge,
influence and negotiate – softer skills that are often overlooked in such a
technical area. Sometimes being the
person who isn’t embarrassed about asking the obvious questions adds the most
value. Being able to challenge
constructively has been shown to be one of the key components for effective
investment decision making.
Understanding the perspective of non-pension people is vital for good communication. With the growth in defined contribution schemes and the increasing number of pension savers under 30, it is surely time that we see the Master Trusts actively seeking to increase diversity by changing the demographics of their trustee boards. There is a great opportunity for them to lead the way in reaching out to younger trustees with the resources available for training and structured development.
Responsibilities of a Pension Trustee
Trusteeship delivers real opportunities for the development of transferable skills. Team building, technical challenges and learning the art of constructive debate are useful in many different roles, so the opportunities for development for younger members of a trustee board are significant.
Unlike the board of a business, a number of trustee board
members may have less control as to the composition of their board. Here it is
the nomination and selection process for member-nominated trustees that can be
addressed and they can actively look to identify candidates that are best
suited to the role of a trustee. Although as we know from other walks of life,
sometimes you need to see someone in the role to know you can do it. Moving on
from the traditional trustee board image needs positive reinforcement to
disrupt the status quo.
Diversifying Trustee Boards With Younger Trustees
For defined contribution pension schemes, younger trustees should be actively targeted. Actively engaging younger trustees will encourage people to engage with their retirement savings. New trustees can promote good, positive information and help their peers to understand why pension saving from an early age is important. The inclusion of diverse age groups across trustee boards can only encourage positive engagement.
To attract a wider group of potential trustees, a board must first understand the skills which are required for the successful running of it. By undertaking self-assessments and putting in place a framework that means the members value the role, trustees will generate greater engagement. The improved engagement will therefore encourage diverse applicants and ensure a visible representation.
Older, legacy-defined benefit schemes face different challenges, not least how Sole trusteeship can deliver diversity of opinion and how we build effective challenges to deliver better informed decisions. A professional trustee doesn’t have all the answers and the Regulator is right to challenge the industry to prove how it meets the questions raised in recent consultations.
For more information about
trustees, pension schemes
and other independent trustee services get in touch with
our team today.